Last mile delivery automation and optimization for a DIY retail chain
Introduction
Transport logistics automation is an important step of scaling a business. When the amount of orders increases and new retail outlets open, the load on the transportation system inevitably grows. At this point, selecting the right optimization software will help you not only reduce the current workload but also get significant benefits.
In this case study, we are going to tell you about Veeroute's collaboration with a large DIY retail chain and showcase the results we have achieved working together.
Client Profile
A large DIY retail chain with a wide range of goods.
700
outlets
279
cities in Europe
and Asia
350 000+
goods ordered
per day
The company is a large player in the DIY retail market. To date, its product range includes more than 1 million items and over 12,000 brands.
Problem
Despite the visible difficulties related to the COVID-19 pandemic, 2020 stimulated the rapid development of many business areas, including DIY and home goods online retail.
According to a study by HIMA, the global DIY segment experienced $755 billion in turnover in 2020, showing an increase of 13.8% compared to 2019. In the USA alone, per capita spending on home improvement goods increased by 19.65%.
In 2020, the company faced a sharp increase in the number of orders. Before the pandemic, sales managers in the region of the most active consumption processed 500 to 1,000 orders daily. After quarantine started, the volume of orders showed prompt and steady growth: in 2022, the daily amount of orders in the most active region reached 5,000.
The unprecedented increase in demand coincided with the retail chain’s expansion, so the load on the transportation system was multiplied by many times. Considering the new conditions, it became much more difficult to tackle the delivery and maintain the client’s high level of service quality. This problem was planned to be solved with optimization software.
Until 2022, delivery planning in the company was already partially automated. Logisticians used a simple routing automation tool in their operations. This software displayed the points on the map and let the user manually add them to the trip plan and then build a route.
However, for a large retailer with a record 1.8 million orders per day, this functionality was clearly not enough. The software could not take into account the specific parameters of the trip, the weight and size characteristics of the goods, and other significant business logic details. In addition, the solution did not allow for tracking the order fulfillment and communication between logisticians and couriers. The employees had to contact each other privately using messengers in order to clarify work issues.
To improve the efficiency of their operations as well as to further develop the company's logistics, a powerful complex optimizer was required. The optimizer needed to be able to successfully solve large-scale problems in a short time.
Search for an optimization partner
In January 2022, the company's team determined the key requirements for an optimizer and began searching for a technology partner. Considering the needs of the business and the specifics of the logistics system, the set of characteristics to evaluate the contenders turned out to be quite extensive.
Scheduling and routing
Automatic scheduling and routing
Planning scenarios:
pre-installed scriptsPlanning scenarios:
adding one’s own scriptsPlanning scenarios:changing scenarios every time when planning
Considering the unique trip parameters (the individual needs of the client)
Considering the unique route parameters (courier's location, parking, etc.)
Considering traffic jams
Planning 10,000 orders in 1 hour
Planning the delivery from multiple warehouses
Planning the placement of goods
in the vehicle bodyPlanning the order of loading goods into the car
Planning grouping routes
Manual tuning after automatic scheduling
Scheduling delivery intervals of at least two hours
No zoning while routing
Calculation of a specific arrival time for each trip
Support of various region zones
Integration, services, etc
Tracking order fulfillment by courier
Generating reports
Multi-user mode
Mobile app (with integration)
Barcode scanner
Integration with a cash register
Online cash register in a mobile app
Cost per year
Payment model: frequency
Payment model: calculation formula
Improvement: independent (open source)
Improvement: software vendor
(for an extra charge)Technical support
From January to February 2022, the company reviewed 14 different offerings. Most of the solutions did not fully meet the stated requirements. Here are the most challenging parameters:
Optimization speed.
The company needed the ability to plan a minimum of 5,000 orders in less than 1 hour.
Payment via mobile app.
Fine-tuning.
Most software developers, including huge market players, could only offer a ready-made product that did not allow for further customization.
In February 2022, the company opted for Veeroute. The product met all of the above requirements, while the Veeroute team showed great interest in the project and confirmed the readiness to refine the solution considering the specifics of the customer's business.
Challenge
Before the joint project started, the following goals were set:
Increase the express delivery couriers’ performance by at least 10%.
Initially, the average performance, expressed in the number of completed orders by one courier per day, was 10.8. The target was to increase it to at least 11.9.
Make the delivery process transparent.
The solution had to provide logisticians with the ability to control the work of couriers and track deliveries in real time.
Set a basis for further logistics automation.
The introduction of a mobile app and the last mile delivery planning optimization were supposed to be the first steps toward the full automation of the company's logistics.
Solution
In February 2022, the project started. In the first stage, the company's employees prepared the data: they updated the database of addresses and phone numbers, unified and adjusted the characteristics of goods, etc. After that, the joint team started integrating and configuring the product.
The region with the highest demand was chosen as the geography for launching the optimizer. It has a population of over 13 million people and covers over 17 square miles. Due to the high level of urbanization, it also has complex logistics.
At the start, the joint team decided to use the optimizer only for planning express deliveries that were carried out on the same day.
The mobile app was launched across the entire delivery zone to track the order cancellations and that couriers were complying with time intervals, ensuring that a high level of service was maintained.
The first launch of the optimizer was held in July 2022. After that, additional tuning was performed based on the data obtained. The second launch took place in November 2022. Since January 2023, the solution has been actively used in the company's operations.
Results
In February 2023, the company's team analyzed the performance of the solution and summed the first results up.
The performance of express delivery couriers was increased by 37%.
Through route optimization, the performance of the express couriers has improved significantly. In December 2022, the average number of completed orders per employee was 14.8, well above the target.
The performance of next-day delivery couriers increased by 22%.
The company's staff includes over 200 couriers delivering orders the next day and later. After Veeroute's implementation, the number of completed orders per courier in this group increased from 22 to 27 per day.
Savings from increased performance were achieved in the first months of operation.
The most active region has about 50 couriers engaged in express delivery. Due to the routing optimization, the company was able to achieve savings in the amount of $3,750 per month.
Express delivery planning time has been reduced by 20 times.
Before the implementation of the solution, express delivery scheduling took about 30 minutes. Now, it takes no more than 1.5-2 minutes.
The mobile app for couriers helped to reduce paper costs.
The company employs over 170 couriers. Before the mobile app was introduced, the trip plan was issued to couriers printed on paper. After all the couriers started to use the app, savings on paper and printing amounted to $5,620 per month. In May 2023, this number reached $18,730.
In the near future, the company plans to expand the geography of the project and launch the optimizer in several megapolises with populations of over 1 million people. Also, the optimizer will be actively used for next-day delivery. The solution already helps simplify the routing in small areas and can significantly reduce the scheduling time.
Through collaboration with Veeroute, we were able to not just achieve delivery transparency and get significant savings but also to create a technological basis for the further development of the logistic system. Thank you!
Director of Logistics